Job Order Cost Essay

There are two main price story establishments use Job e actually(prenominal)ege cost dodgings and Process cost systems. some(prenominal) have very distinct differences that help sever altogethery specialize in a certain type of manufacturing company. The pedigree ensnare cost system in particular is used to provide product costs for each quantity of a product that is manufactured. When a product is called to be manufactured, accordingly it is called a muse. Once the note is ordered, the manufacturing company must(prenominal) go through a flow of meters to tell apart the job.The flow of a job order cost system is as followed materials, work in pass off, accurate goods, and cost of goods sold. At the start of the job order cost system is materials. Materials, or more accurately direct materials, are the main items used in building the job. A receiving calculate must be make when the materials are received and inspected. Once the materials and the receiving report a nd complete, the materials are write in a journal entry as a debit entry to Materials and a quote to Accounts Payable.Following the journal entry, a material require must be made to properly obtain the materials from the storeroom. Once the materials requisition is received the job process flows to work in process and a journal entry must be made with a debit to Work in process and a credit to Materials. Once the job is in the Work in process stage, the factory labor cost and the mins of labor must be accounted for. Work in process is the step in which the materials are being used by the laborers in order to complete the job.Some companies choose to use clock cards, in-and-out cards, or electronic badges in order to monitor the amount of labor hours have been clocked in. irrespective of the method, the hours must be clocked and multiplied by the rate of pay in order to properly complete the work in process perspective of the job. Once the hours and rates are calculated, a jou rnal entry is written with a debit to Work in Process and a credit to Wages Payable. However, before a job reaches the step, undefiled goods, other expense must be accounted for. manufactory bash are all manufacturing cost besides direct labor and direct materials.Since factory command command smash-up costs give the gatet be pin-pointed to a single job and must be rated, the costs are allocated amongst the jobs. This process is called cost allocation. In order to estimate the Factory overhead, we use the Pre decided Factory Overhead Rate formula, which is Estimated Total Factory Overhead Cost divided by the Estimated Activity Base. Once the factory overhead rate is determined and the calculations of the hours and the rate are finished, hence a journal entry with a debit to Work in Process and a credit to Factory Overhead is recorded.Once all of the costs, debits, and credits are correctly find out in the work in process step, the flow of the job goes to finished goods. Finished goods are the process in the job where the item is holy and ready for sale. Finished goods accounts for the cost data for the units manufactured, units sold, and units on hand. Once a product is sold, the flow of the job reaches its conclusion with cost of goods sold. To record a sale in the journal entry, two entries must be made. First, a debit to Accounts receivable must be written along with a credit to Sales.The second journal entry would include a debit to Costs of Goods Sold and a credit to Finished Goods. An sheath of how a job order system would flow could be depict a postpone making business. For example, if a customer orders blow tables, accordingly the table manufacturing company has received a job to make snow tables. The first step for the company would be to order the materials needed for take of the table. Materials would include the wood, glass, and metal. Next step would be to calculate the cost of the materials. assume the company would need 200 pounds of wood, 100 beams of metal, and 50 units of glass, they would then reproduce the amounts of each material with the single cost of each material. If a log of wood is $10, beam of metal is $15, and a unit of glass is $20, then the direct materials cost is as followed $10 x 200(wood) + $15 x 100(metal) + $20 x 50(glass) = $4,500. Once the material is ordered and received, someone must inspect the wood, glass, and metal then fill out a receiving report stating the quantity and condition of the materials.Once the materials are correctly accounted for, they are locomote to the storeroom. At this stage, the table process is in the work in progress stage. From there, a materials requisition must be sent in order to move the wood, glass, and metal for workers to start making the tables. The amount of hours must be recorded in order to determine the direct labor bear on in making the tables. Assume that the amount of hours required to make 100 tables is 300 hours. From there, they would multiply the amount of hours by the rate at which the laborers force back paid. take for granted the rate for the laborers is $10 an hour, then the direct labor would be calculated as followed 300 hours x $10 = $3,000 labor hour cost. Factory overhead must be calculated after conniving the direct labor and direct material cost. Since factory overhead includes all manufacturing cost besides direct materials and direct labor, then it follows that factory overhead includes indirect materials, indirect labor, factory power, and factory depreciation. In order to estimate the factory overhead correctly we must find the factory overhead rate.Assuming the estimated total factory overhead cost is $5,000 and the estimated activity brutal is 500, then using the predetermined factory overhead rate we can find the following $5,000(Estimate Factory Overhead Cost)/ 500 (Estimated Activity Base)= $10 Factory Overhead Rate. Then we would find how much factory overhead there actually is. To find the factory overhead, the company must don the factory overhead rate and multiply it by the number of hours used. Assuming there is 150 direct hours, the following is calculated 150(hours) x $10 (Predetermined Factory Overhead Rate) = $1,500.Once all of the factors in work in process are settled and completed, a completed table should be finished and thus the job goes to finished goods. Since finished goods is a dictatorial account, it keeps track of how many units are finished, sold, and are on hand. Once the table is sold, it is transferred from finished goods to cost of goods sold. After the sale, the job order system is complete and so is the job. Job order cost system is a very straight forward system that many manufacturers use for custom orders or batches of items. The system has one path, and ultimately makes for job orders to flow smoothly.